Wednesday, December 5, 2012

24.0 Trading Gangs

I was in my prepubescent age when I joined a neighborhood gang - five boys and one little pesky girl who could not be shaken off behind by her older brother. The little girl's name was "Diosa" and she was the gang's muse. Though her name belongs to the pantheon, she was our own version of Les Miserables' Cosette. And the boys? Well, we were then all the male version of Cosette, wearing hand-me-down tattered clothes with holes and patches in all the unintended places. But despite this, we were a merry bunch happily singing as we went about accomplishing our mischievous missions. 

Of the five boys, I was the only one who lived on the opposite street where all the other gang members lived. Our leader, the eldest among us, was an out-of-school youth who came from a family of blacksmith. He commanded respect, he being the eldest and therefore the naturally taller, more muscular, and wiser among us. He planned the "hit" and led in its execution. We had slingshots for weapons, our very own eyes for binoculars and our rugged feet for vehicles. The target was either the cornfields and fruit trees across the river or the innocent barrio lasses swimming in the river. Every adventure was exciting and testosterone-driven with a little element of danger. Our leader was smooth while I was a bumbling follower relegated to the task of carrying the loot or acting as lookout. He was a natural and I was not. But I was trying to fit in while attending classes and working on my after-school assignments. That was the 1970's. 

Back to the present, year 2012, I found myself being a member of a "trading gang" without really trying courtesy of an SEC commissioner who fancies herself becoming as the online spymaster of illegal trading activities. In her view, the trading gangs influence or at least try to "influence stock market prices and volumes by buying in unison . . . and the scary part is that some of their analyses are inaccurate which can hurt the issuers." (Reference: Business Mirror). I laughed on her first view that "trading gangs buy in unison" because it is partly true and I laughed even more I was almost in tears that "some of their analyses are inaccurate" because it is uber-true. Now here is the scarier part - anyone with this simple view can become a great spymaster. 

Let me break it down. Every stock trader, member of a trading gang or not, does wish to "influence" the stock market price in his/her favor. This is because every stock trader wants to earn and not lose money. Every stock trader also hopes to buy in unison with the other traders because who would like to buy a dead stock? At one point or another, two or more traders would exactly have the same buy and sell positions of a particular stock. These buy and sell positions would naturally grow in greater volumes depending on how bullish or bearish the market psychology is. It is also true that the so-called  trading gangs confer with each other on their chart analysis and if they do so concur, they will in all probability take positions of the same stock about the same time. Who would like to be left behind? But can they actually trade in unison as suggested by the commissioner? False. The trading gang is a loose organization whose members do not profess loyalty to a gang lord. Most of them do not even see or know each other and any assumption or attempt to buy in unison will crumble because each trader will be subjected to a "prisoners dilemma". 

The trading gangs have their own gurus, masters, and wannabes churning out technical analysis of this and that stock based on chart patterns, candlestick formations, indicators and oscillators, trendlines, among other stuff. I do this myself and the funny thing is that the observation of the SEC commissioner is right - the analyses are, in many, cases inaccurate. The stocks do not move exactly as we published them in the online forum or blog. But of course! The simple reason is that there are other factors not included or captured in the analysis which the good commissioner is better off focusing her sights on - insider trading, false rumors, fomenting the market, etc. - which the trading gangs do not have the advantage of information or the financial muscle and unity in executing such trades.  

I love my trading gang. It reminds me of the neighborhood gang of my childhood past long gone. Actually, it is a multiple of that and so much more. We have two muses, by my own making, whose names do not echo much like that of goddesses but who nonetheless stand among them in beauty and splendor. We fondly call our first muse as KB. She possesses such childlike charm and curiosity, who constantly nags every guru, master, and wannabee for tips and TPs (that is target price for the uninitiated). The second muse, we call her LT because she resembles that ageing star in her younger years - those eyes that can melt a thousand chocolate kisses. But she has been quiet of late. 

Our founder is Superman of Chinese descent and our membership is so diverse. We have chinoys, syanos, bisoys, shaq daytoys, mama sans and of course the OFWs eking out remittances that keep this economy afloat in troubled times and good. During trading, we merrily cheer our favorite stocks and boos known sharks. But when the market is boring, the conversation drifts to any topic other than the stock market and that is where I play the game most. Well, someone has to do the job of being the jester to keep the sanity in check of these trading addicts. This trading gang is just one of many. I am also a member of another trading gang. Hint, its initial is yummy for roasting. This other gang is going to have a Christmas Party soon and I will be going. Perhaps, the organizer may want to invite the good Commissioner so she will have a greater appreciation of how we keep the stock market alive.      

Truth to tell, we are not really a trading gang. We are just an online forum of small-time online traders who need each other's company. Online trading is lonely and this trading forum is helpful in so many ways. It makes you feel that you are not alone. If indeed we are a trading gang, I will stand proud to be part of it. 


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